O’Neill believes the expensive capture of Chelsea’s reserve No.3 is an indication of the vast riches at Manchester City’s disposal during the January window.

And the Villa boss has warned claret and blue fans expecting a similarly frivolous spree that chairman Randy Lerner intends to adhere to a sensible transfer policy.

“Could we compete? No,” said O’Neill bluntly.

“I don’t know about Tottenham, I don’t know what their position is, but we couldn’t compete with Manchester City.

“Manchester City, as a player in the market, have made things change.

“If the opening day is anything to go by, where it looks as if Wayne Bridge

has gone for £12million, then maybe anything will go on this time. I really don’t know. That’s not the way that Mr Lerner is. Although we spent money in the summer-time that’s because we had to.

“We’d lost a number of players and we spent some money in trying to give the squad a proper boost.

“But that’s not the way he wants to run the football club, just going out and spending.

“We’re going to have to see what we can do. But we definitely want to try and improve the squad, which we probably need to do.”

O’Neill reassured supporters that even though Villa won’t break the bank this month they are still intent on building from a position from strength. Having climbed into the Premier League top four against the odds, the club are determined to ensure their squad is competitive enough to stay there.

And the manager believes that the best players in the Villa Park dressing room would welcome any new additions, rather than feel threatened by them.

“I think we’d like to keep the momentum going, that’s right,” said O’Neill.

“If you could guarantee me that the players that we have at this moment could get through the season unscathed then that’s a different matter, but we don’t know that.

“My belief is that the really top quality players around this football club would welcome a bit of help.

“If you’re a really good player and you’ve been doing brilliantly for this football club every week, you’ll feel that, unless we’re rotating every week, you should be able to keep going and keep producing. It should encourage them.”

O’Neill insists that recruiting players in the January window is never simple and admits his own deals could be decided by a domino effect from other clubs doing business.

“What I’m saying is, is there a knock on effect? Do football clubs then say I’ve got a player that

I’m prepared to sell, but I’ll wait to see what the market is and then I can ask X pounds for him – or is it that Manchester City are the anomaly?

“I don’t think anything in January is ever going to be straightforward and of course you’re always thinking that you might be paying over the odds.

“If we can, we should try and add real proper quality to the team. It’s the only way of trying to make progress to take a group of players. It might happen. I’m sitting here in the first few days of the month with some sort of plan and feeling that we might be able to do something.

“Maybe by the end of the month it might be picking up some loan players or something. But at the moment the only way for us to improve and keep momentum going is try and get a bit of quality.”

Meanwhile O’Neill has vowed to treat the FA Cup “with the dignity it deserves” by fielding his strongest possible side in tomorrow’s third-round clash at Gillingham. O’Neill never progressed beyond the quarter-finals as a player and is conscious Villa have encountered little success in the competition since reaching the 2000 final.

But he is not expecting an easy ride at the Priestfield Stadium despite Villa occupying fourth spot in the Premier League after an eight-game unbeaten run.

O’Neill said: “Our record since 2000, when Villa reached the final, has not been so clever. I have been responsible for the last couple of years of that when we played Manchester United.

“I saw Gillingham play last week against Wycombe and thought they played exceptionally well in the second half. I accept it will be a totally different game – even if they hadn’t played well – and I wouldn’t want to go out.

“I want to treat the competition with the dignity it deserves and am desperate to get through.

“I accept the top Premier League sides in recent years have accepted the Champions League is the Holy Grail and maybe the FA Cup has been lessened from that viewpoint.

“The competition is really dear to me. I’d love to do well. It was something I never won as a player and it would be great to do well in it.”